Warner Bros Discovery Rejects Paramount Offer, Source Says, Company Ponders Sale Options

Warner Bros. Discovery (WBD.O) has rejected a nearly $60 billion offer from Paramount Skydance (PSKY.O), a source said Tuesday, opening new tab new tab The company will explore sale options, a source said.

Reuters exclusively reported that the company’s board rejected a mostly cash offer of about $24 per share for the company, whose assets include the Warner Bros. film and television studios, CNN and other cable television networks, and the HBO Max streaming service, according to a source with knowledge of the matter.

The company’s shares closed up 11% on Tuesday.

Warner Bros. and Paramount declined to comment.

Comcast (CMCSA.O) is opening a new tab and will likely review the media company’s assets, another source told Reuters on Tuesday. Netflix (NFLX.O) is also opening a new tab, CNBC reported, following previous reports that Paramount Skydance CEO David Ellison was also in talks to buy the entire company.

Warner Bros., the studio behind the “Harry Potter” and DC Comics film franchises, announced plans in June to split into studio-centric and cable-focused units by next year to separate its growing streaming business from the rest of its cable network unit.

The company said Tuesday that the board will consider a number of options, including the planned separation, a deal for the entire company or separate transactions for the Warner Bros. or Discovery Global businesses.

An alternative separation structure that would allow for the merger of Warner Bros. and the subsidiary of Discovery Global is also being considered.

SALES CAN RESHAPE THE MEDIA LANDSCAPE

A sale or spin-off would be one of the most pivotal moments that reshapes the media industry. Streaming has fundamentally transformed the industry by stealing audiences and cannibalizing advertising revenue for traditional television broadcasts.

Any deal with Warner Bros. Discovery would give the buyer control of a major studio and a leading streaming service, but would also saddle him with the company’s nearly $35 billion in debt.

Shares of WBD, which has a market value of $45.36 billion, have risen more than 46% since early September, when reports emerged of Paramount’s interest in the company.

“Paramount is the most likely to buy the company. For Netflix, an acquisition after the planned spin-off would make more sense because the studio would be very valuable to Netflix, but the TV networks would not be as valuable,” said eMarketer senior analyst Ross Benes.

The company has already rejected Paramount’s initial offer because the offer of about $20 per share was too low, two sources told Reuters.

Bank of America research analyst Jessica Reif Ehrlich estimated the entire company was worth $30 per share, given its assets, and noted that WBD had no comment on the offers.

“We continue to believe that Warner Bros. is an extremely attractive potential acquisition target, given the company’s wealth of premium intellectual property (Harry Potter, DC, Lord of the Rings, Game of Thrones, etc.) and robust library,” he wrote in an investor note.

Comcast (CMCSA.O) opens a new tab is in the process of spinning off its NBCUniversal cable channels, including USA Network and CNBC, into a new company called Versant later this year.

“Potential WBD suitors, including Paramount, Comcast, Netflix, Amazon and Apple, may see the value in moving sooner rather than later to acquire all of WBD rather than waiting to acquire only broadcast and studio assets,” said Seth Shafer, Kagan principal analyst at S&P Global Market Intelligence.

Netflix did not immediately respond to Reuters’ request for comment.

GOALS OF THE ELLISON FAMILY

Skydance’s advances immediately following its acquisition of Paramount reflect the Ellison family’s insatiable appetite to dominate the global media landscape amid a favorable regulatory regime in the United States.

Analysts believe David Ellison’s deep pockets, backed by his father, Larry Ellison, co-founder of Oracle and the world’s second richest person, give him the power to take risks.

Analysts say the elder Ellison’s close ties to U.S. President Donald Trump could also ease regulatory hurdles and avoid the scrutiny that usually comes with such a merger.